Friends Provident International Summit Bond

An independent review by our team of experts.

Review summary

Friends Provident International Summit Bond

Friends Provident International is part of the Aviva Group and has more than 35 years’ international experience.  Its heritage dates back over 300 years.

Friends Provident International develops savings, investment and protection solutions for customers in Asia and the UAE. With offices in Dubai, Hong Kong, Singapore and the Isle of Man, the employ a staff of more than 500 worldwide.

Overview

The Friends Provident International Summit Bond is a unit linked life assurance plan from Friends Provident International.  It offers a limited range of investment options in the form of mirror funds that FPI has created for international investors.

Summit has been widely marketed to expatriates over many years.

The plans are sometimes known as baby bonds because they enable clients with relatively small amounts (the currency equivalent of £25,000) to invest on a tax efficient international platform.

FPI Summit Bond Key Features

Mirror funds – Friends Provident proudly states in their in their marketing literature that the bond provides access to a wide range of mirror funds.

Whilst the range does provide access to all the major asset classes, industry sectors and geographic regions, mirror funds have an extra layer of charges embedded within them and are expensive.

These additional charges cause a drag on investment returns and they will always under-perform the clean lower cost alternative as a result.

Performance statistics are updated monthly, and fund prices updated daily on the fund fact sheets, accessible via FPI’s Fund Centre in an easy to use format.

Summit Bond holders are permitted to invest in a maximum of 10 underlying funds at any one time.

Multi-currencies – can be denominated in US dollar, GB pound, Hong Kong dollar, or Euro.

Baby bond – facilitates smaller initial lump sum investments: US dollar 37,500, GB pound 25,000, Hong Kong dollar 37,500 - and Euro 37,500.

Charges – If you have been recommended the FPI Reserve Bond, your financial adviser should provide you with an illustration and personal charging structure.

This will detail all charges that are taken from your investment.

FPI in their product literature claim to keep the charges to a minimum so you can “make more of your money work for you.

We disagree, and think the product is expensive.

Here are the charges that you can expect with Summit:

Establishment charge:

A charge of 1.6% of the premium each year will be taken for the first five years.

This is taken as 0.4% each quarter by deduction of units from the plan.  Additional premiums receive their own establishment charges. 

Administration charge:

This is currently 1.2% of the value of each fund each year, debited directly to the fund on each valuation day.

Underlying investment fund charges: 

The underlying fund charges vary from fund to fund, and can be as high as 3.35%, depending on mirror fund chosen.

Switching charge: 

Currently no charge is made, although FPI do reserve the right to impose a charge, upon three months’ written notice to bond holders of up to 1% of the amount involved or USD 15, GBP 10, EUR 15 or HKD 150, if greater.

Early Surrender  Summit does not have an early surrender penalty, however, if you do decide to surrender the whole of your plan, then you will have to pay all outstanding establishment charges.

The pros

  • Popular expat investment plan
  • Preferred choice of expat financial advisers
  • Strong brand of parent company

The cons

  • Risk of hidden commission
  • Potentially inflexible
  • Commonly mis-used
  • Expensive
FAQs
What is the Summit Bond?

Summit is a unit-linked plan suitable for customers with a lump sum to invest for a medium to long period (a minimum of five years).

Summit offers a loyalty bonus and the option to withdraw up to 90% of your investment, penalty-free from the start of your plan.

Summit is available to those who are aged 18 and over (at least one life assured must be 79 or under at plan commencement).

Its aims:

To allow you to invest in funds to suit your investment needs.

To allow you to take regular withdrawals.

Your commitment

  • To invest a lump sum payment of at least USD 37,500.

  • To view your plan as an investment for at least five years, although you can cash it in whenever you want (BUT BE WARNED: if you do, any outstanding establishment charges will be still be taken)!

What are the main risks with the Summit Bond?

Well, apart from the costs and the fact your adviser might mis-use it when structuring your portfolio...FPI say these are the main risks: -

What you get back in the future depends on how well the investments perform.

The value of the plan can go up and down. You could get back less than you’ve paid in.

When you cash-in your plan, you may get back less than your illustration shows. This could happen for several reasons, for example if:

  • –  investment returns are lower than shown;

  • –  our charges are higher than shown;

  • –  you take out more money than shown.

Some funds carry a higher level of risk than others, and may be subject to sudden and large falls in value. This could erode some or all of your capital.

If you invest in a fund denominated in a currency different to the plan currency, the value can go up and down simply because of changes in the currency exchange rate.

Inflation will reduce the spending power of any money you get back in the future.

What is the Summit loyalty bonus?
  • On the third anniversary date of the plan and on every subsequent anniversary, you will be entitled to a loyalty bonus.

  • The bonus will be applied as additional units into your plan.

  • Any additional payments you make will also receive their own loyalty bonus from the third anniversary of each contribution.

  • The loyalty bonus structure is as follows:

Number of complete years since commencement date or the additional premium payment date as appropriate  = 3 to 5

Loyalty bonus % of bid value = 0.5

Number of complete years since commencement date or the additional premium payment date as appropriate  = 6 - 10

Loyalty bonus % of bid value = 0.75

Number of complete years since commencement date or the additional premium payment date as appropriate  = 11+

Loyalty bonus % of bid value = 1

How much are Summit's fees and charges

Product charges

An establishment charge of 0.4% of your payments will be taken quarterly for the first five years after you take out your plan or after each additional payment.

Fund charges

  • An administration charge of 1.2% of the bid value of each fund is taken a year.

  • Annual management charges and other expenses are incurred by the underlying funds. The amount depends on which funds are chosen. 

    These charges are reflected in the unit price of the funds you choose and are debited directly from the fund on each dealing day.

    Other charges that might apply

  • Currently no charge is made to switch between funds, although we reserve the right to impose a charge, on one month’s written notice to you, of up to 1% of the amount involved or USD 15, GBP 10, EUR 15 or HKD 150, if greater.

  • If you decide to cash-in the whole of your plan, then any outstanding establishment charges will be taken. 

  • You will have to pay any bank charges incurred for processing withdrawals.

Customer reviews
Rubbish

I was crow-barred into investing in the Summit - I stupidly even topped up when I got a bonus. I was forced to focus on a charge of 0.4% that didn't sound like much. My IFA went on and on about it. Turns out it's 0.4% 4 times a year for 5 years and that's only ONE of the charges that attacks your investment. Steer well clear.  This sort of product would be banned in the UK I reckon.

Expert verdict
Expert Assessment of Friends Provident International's Summit Bond

In our opinion, although this product is one of the better within its peer group, it is now superseded by other options.

The shortcoming of FPI's Summit is that the explicit and implicit charges of this type of product are very high. 

Whilst a commission-based salesperson may well direct you to this type of investment plan, there are now substantially more cost effective, more flexible and arguably better performing products available to the discerning international investor. 

If you already have a Friends Provident International Summit Bond we recommend you have a free, no obligation X-Ray Review™conducted to give you the information you need to make a decision on the best way forward.

It will detail fees, performance, risk and asset allocation - and clearly highlight if you need to make any changes to the way you're invested.

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Jake van den Dries

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